What are Additional Insureds?
It is a common business practice to include in contractual wording that one party is required to name the other as additional insured. This article will explain what it means to name somebody as additional insured and why it is often required.
Protection against lawsuits
By requiring to be named as additional insured, the company is protecting themselves against lawsuits. Business relationships benefit both businesses, but it also creates an increased risk of being sued. By requiring that the other party name them as additional insured, they are protecting themselves from any negligence on the part of the other party.
One example is that general contractors require that their subcontractors name the general contractor as additional insured to protect themselves if there is a lawsuit against them for work done by the subcontractor. If they are named as additional insured on the subcontractor’s policy, then the subcontractor’s policy will respond to any lawsuits that name the general contractor for work done by the subcontractor.
Another example is if a customer slips on a wet floor in a grocery store and sues both the store and the property owner. If the property owner has been named as additional insured on the tenant’s policy, then the tenant’s policy will respond to the lawsuit. Without being named as Additional Insured on the tenant’s policy, the property owner would need to file a claim under their insurance.
The need for additional insured status should be built into the contract. Always use a contract when working with subcontractors or when in a business relationship with another company, and always require that they name you as additional insured. Having clearly defined roles for both parties is always necessary, especially when it comes to insurance coverages. You can even specify what the minimum limits are that they should carry to provide adequate coverage and even what type of insurance they need to carry, such as General Liability, Workers Compensation, and Professional Liability.
Your insurance agent can help you determine what limits and coverages that you should require your subcontractors to carry to keep your business protected.
How are Additional Insured’s named?
Some policies include wording that certain parties, such as a landlord, are already included as an additional insured. In these cases, a certificate is issued to the additional insured. The Certificate of Insurance will name them as additional insured and it shows the limits of coverage, policy dates, policy number and lists any other additional information that is needed, such as the location address.
For policies that do not include automatic additional insured status to certain parties, an additional insured endorsement is issued. Some policies will provide blanket additional insured status, while others are specific to one entity only and an endorsement must be issued for each additional insured. Endorsements can be the standardized ISO endorsements or carriers can develop and use their own forms. The endorsement is usually provided, along with the Certificate of Insurance, to the Additional Insured.
Most insurance brokers need to get Additional Insured Endorsements from the carrier before issuing a Certificate of Insurance. If special wording is required, or if the Additional Insured Endorsement is based off of the payroll or sales of that specific job, there is often an additional cost and all endorsements must be issued by the carrier, which can take time.
At Fixated Financial and Insurance Solutions, we have direct writing authority with the majority of our carriers, which means we can issue nearly all Certificates of Insurance and Additional Insured Endorsements the same day they are requested and there is usually no additional premium. If we need to have the carrier issue the endorsement, our excellent relationships with our underwriters ensures that we can still get these processed quickly, even if there is special wording or an additional cost.
We pride ourselves on being customer service orientated. We know that waiting for Certificates of Insurance can hold up income from jobs and so Certificates are given a priority. Our clients can even send over requests via our website for Certificates of Insurance or email us. In addition to an assigned account manager, we also have a service department, which ensures that we are able to make Customer Service a priority.